What is the purpose of the Truth in Lending Act (TILA) and the disclosure of the Annual Percentage Rate (APR)?

TRUTH IN LENDING ACT (TILA): A federal consumer protection law requiring lenders to DISCLOSE the true cost of credit so borrowers can make informed decisions and compare loans. KEY DISCLOSURE — APR (Annual Percentage Rate): Reflects the interest rate PLUS certain loan costs/fees (origination fees, points, mortgage insurance), expressed as a yearly rate; the APR is usually HIGHER than the note rate because it includes those costs; it lets borrowers compare the true cost of different loan offers on a standardized basis; OTHER TILA DISCLOSURES: Finance charge, amount financed, total of payments, payment schedule; REGULATION Z implements TILA; TRID (TILA-RESPA Integrated Disclosure): Combined TILA and RESPA disclosures into the Loan Estimate (given within 3 days of application) and Closing Disclosure (given at least 3 days before closing); RIGHT OF RESCISSION: For certain refinances of a primary residence, TILA gives a 3-day right to cancel; PURPOSE: Consumer protection through transparency; APR enables apples-to-apples loan comparison; understanding TILA, APR, and the related disclosures is important financing/consumer-protection knowledge tested on the national exam.